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"DWM Insights"

Continuing Education

Contemporary Letters

Looking for the latest news on DFA funds, retirement income planning and wealth management? Look no further. Stay informed with the most up-to-date financial news and tips from across the country and around the globe. We upload new information regularly.

Feb 25, 2012IFA.tv Morningstar Managers of the Year - Show 18-2 - Mark and Tom present a variety of charts showing the performance of several mutual funds managed by individuals who were Morningstar's Manager of the Year from 1991 to 2008. See the charts here. They discuss the inception to date performance of these funds and the period after receiving their star status, showing that the funds' alphas (performance over a benchmark) over time were not statistically significant, except in one case.

Dec 1, 2011 www.IFA.tv -- From the televison studio in the new IFA Media Lab comes 6 new IFA.tv webcasts: Resist the Temptation!, Risk Capacity, Avoiding Style Drift, Mark Hebner's Story, The IFA.com Website, and the Value of a Passive Advisor. Stay tuned, several new webcasts are being rendered now. You can watch in HD on your computer, Kindle Fire, Android Device, iPhone or iPad and with AppleTV and Airplay, can pop them up on your TV and watch in HD. Youtube, iTunes (audio and video), and Vimeo editions coming soon.

Nov 29, 2011 What Does a Winning Streak Tell Us? by Weston Wellington - Bill Miller is one of the most closely watched money managers in the industry, so it was big news when he announced his decision last week to step down as portfolio manager.

Nov 22, 2011 The New IFA Painting: Asset Location An additional way that IFA can add value is not just asset allocation but asset location. Specifically, for a client that has a mixture of taxable accounts, traditional IRAs, and Roth IRAs, it is often helpful to construct a single portfolio consisting of multiple investment vehicles that are located in different accounts with the ultimate purpose of optimizing after-tax returns.

2010--Risk was Rewarded!
Last year, investing success came from embracing risk. Certainly, it wasn't hard to find - and DFA led the charge to come out on top in Barron's annual ranking of best fund families. Click here to read the full article.

Feb 9, 2011 2010--Risk was Rewarded!
Last year, investing success came from embracing risk. Certainly, it wasn't hard to find - and DFA led the charge to come out on top in Barron's annual ranking of best fund families. Click here to read the full article.

"Professor Wermers said he believed that it was “exceedingly probable that any fund that has beaten the market by an average of more than one percentage point per year over the last decade achieved that return almost entirely due to luck alone. By definition, therefore, such a fund could not have been identified in advance,” he added.

The investment implication is clear, according to Mr. Kritzman. “It is very hard, if not impossible,” he wrote in his study, “to justify active management for most individual, taxable investors, if their goal is to grow wealth.” And he said that those who still insist on an actively managed fund are almost certainly “deluding themselves.” nyt.com

While Miller credits his own past success in the active management arena to a “modicum of skill,” he himself recommends that investors buy index funds. Specifically, Miller told Money that a “significant portion of one’s assets in equities” should be comprised of index funds. “Unless you are lucky, or extremely skillful in the selection of managers, you’re going to have a much better experience going with the index fund,”...[Click Here to Read More]

Dec. 3, 2010 Odds are you don't know what the odds are. The probability of getting a market forecast correct maybe much higher than you expect. For example, if an event has a 10% chance of occurrence and 10 forecasts are made, there is a 65.13% chance that one of those guesses will be correct. How many forecasts do we hear every day? See this chart and test your own assumptions about forecasts.

October 12, 1995 - Oldie but Goodie: A Classic: Listen to the Rex Sinquefield Active Versus Passive Debate. From Rex: "It is my contention that active management does not make sense theoretically and isn't justified empirically. Other than that, it's O.K.

A Tenfest: 10-10-10 at 10:10am, Powers of 10 every 10 seconds In honor of Charles and Ray Eames, see the incredible short film: Powers of Ten. Powers of Ten (1977) takes us on an adventure in magnitudes.

Charles Eames provided the inspiration to create the Fair Price Simulator in the IFA lobby. He designed an outdoor 14 foot Probably Machine for the 1964 World's Fair IBM Exhibit.

October 12, 1995 - Oldie but Goodie: A Classic: Listen to the Rex Sinquefield Active Versus Passive Debate. From Rex: "It is my contention that active management does not make sense theoretically and isn't justified empirically. Other than that, it's O.K. But it's easy to understand the allure, the seductive power of active management. After all, it's exciting, fun to dip and dart, pick stocks and time markets; to get paid high fees for this, and to do it all with someone else's money." Click play button below to listen.

Feb 9, 2010 - IFA is your independent FIDUCIARY. Your broker is not. Hire an advisor that must act in YOUR best interest, not the best interest of the person or firm receiving loads, 12B-1 fees and commissions based on the stock and bond trading. Federal and state law requires that an advisor act solely in the best interest of the client. Check your brokerage agreement for this clause: “Your account is a brokerage account and not an advisory account. Our interests may not always be the same as yours. Please ask us questions..., including the extent of our obligations to disclose conflicts of interest and to act in your best interest. We are paid both by you and, sometimes, by people who compensate us based on what you buy.”

The SEC should turn over a new leaf and dedicate itself at every opportunity to preaching to the public that individual stock picking is a mug's game -- that indexing and other low-cost, buy-and-hold strategies are a better way to make America's peerless capital markets work for them.” Holman W. Jenkins, Jr., Agency Interrupted, Therapy for the SEC begins with the "Efficient Markets" Hypothesis. The Wall Street Journal; Jan. 12, 2005; Page A11

August 14, 2009 - The rush you get from day trading: "No greater force in the world." See more...

Followup on above video: Tim Sykes, age 25, ran a top-ranked, short-bias fund called Cilantro Fund Partners. After suffering a roughly 35% loss over two years, Timothy closed his hedge fund. Get into Stockaholic Rehab.

June 12, 2009 - Interview with Eugene Fama, Sr. - He covers efficient markets, the zero or negative sum game of active management, diversification, probability machines and why you should be a passive investor.

April 17, 2009 - Index Funds: Just Smart - "What distinguishes index funds is that they don't presume to have greater wisdom than the collective market, but instead try to channel its wisdom to your advantage. Do your gambling in Vegas" Source: Forbes.com

Feb 8, 2009The IFA Challenge - IFA issues a challenge to all individual or professional investors. Submit monthly statements covering the period from Jan 1, 2000 (when IFA started) to Jan 31, 2009 and see if the risk and return of the portfolio you managed is more optimal than any IFA Index Portfolios. We have yet to see one.

Capitalism works on average and over time. This statement might be explained by Hebner's estimate that more than 100,000 public companies over 80 years have earned an average annual profit about 10%/year. If companies or stockholders of those companies desired capital, they traded their stock certificates for cash from investors. Through this trade, stockholders gave up the stock's future return of about 10% per year (currently 9.26%). That return has been driven up over the last 80 years and 10 months by the average profits of those simulated and actual S&P 500 companies. This is known as the "cost of capital" and the cost of capital is paid to the investors.

Nov. 18, 2008 - Climbing the 12 Steps is not easy. See the new 48"x72" masterpiece painting by Lala Ragimov: "Journey to Tradeless Nirvana". This painting will be the centerpiece of the lobby in IFA's new 1st floor, 8,200 sq. ft. office.

Is It Different This Time? If you compare the 1907 crisis that struck U.S. and European financial institutions with 2008’s economic emergencies, you will discover striking similarities. Each time capitalism was resilient. - The Panic of 1907, Lessons Learned From the Market's Perfect Storm - Abstract from getAbstract - buy from amazon - Also see Manias, Panics and Crashes.

Oct 26, 2008 Advice IFA agrees with from Larry Swedroe: " What we do know is that trying to time the market is a loser's game. And most of the time investors simply get it wrong, selling AFTER market drops and only buying well after it recovers. That results in the dollar weighted returns they earn being well below the market's time weighted returns." - My Take on This Market, by Larry Swedroe - 10/26/08

Oct 17, 2008From Warren Buffett: "Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. .. "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." ..."What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over." - Buy American, I Am. NYT.com

July 26, 2008 Must Read by Charles Ellis: The Loser's Game, Circa 1975, 33 years ago, but about 95% of investors still don't get it."...most institutional investment managers continue to believe, or at least say they believe, that they can and soon will again “outperform the market.” They won’t and they can’t." - Charles Ellis

July 8, 2008: August 13, 1979 Issue of BusinessWeek “The U.S. economy probably has to regard the death of equities as a near-permanent condition.”

Oct 10, 2008Talk to Chuck Schwab. "During times of uncertainty, some investors make the mistake of trying to time the market by simply stepping out. History suggests that asset allocation, diversification and periodic rebalancing are the tools that investors should use to weather market downturns."

Oct 9, 2008Concerned About the Markets? Read "The Four Pillars of Investing" by William Bernstein, Chapter 6, titled Market Bottoms: The Agony and the Opportunity. It’s only 10 pages and it is worth the read. In his section titled How to Handle the Panic Bernstein says, "What separates the professional from the amateur are two things: first, the knowledge that brutal bear markets are a fact of life and that there is no way to avoid their effects; and second, that when times get tough, the former stays the course; the latter abandons the blueprints, or, more often than not, has no blueprints at all."

Oct 3, 2008 A Classic from 1998 (nothing has changed): MARKET TIMING: A PERILOUS PLOY -- "Why do timers seem so inept? The stock market makes dramatic moves in relatively short periods, and those who miss them effectively miss a lot of the gains."

Oct 3, 2008 "The only people who get hurt on a roller coaster are the ones who try to get off while it’s rolling!" Submitted by Daren.

Sept 15, 2008:
From Wikipedia: "The notion of creative destruction is found in the writings of Mikhail Bakunin, Friedrich Nietzsche and in Werner Sombart's Krieg und Kapitalismus (War and Capitalism) (1913), where he wrote: "again out of destruction a new spirit of creativity arises". The economist Joseph Schumpeter popularized and used the term to describe the process of transformation that accompanies radical innovation. In Schumpeter's vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies that enjoyed some degree of monopoly power."

Sept 12, 2008:from WSJLehman's Fate
"And Lehman took more risks than most. Like Bear, it was leveraged at more than 30 to 1, which made for bigger profits in the mania of 2005-2006 but also greater losses when the music stopped. Lehman also went all in with mortgage products, even getting deeper into Alt-A loan bets as late as this year. Its CEO, Richard Fuld, appears to have managed the crisis with less skill and dispatch than has, for example, John Thain at Merrill."

July 26, 2008: Are stock prices accurate? If they are, there is no reason to trade, unless you need the money. Definition of Fair Market Value: The price that a given property or asset would fetch in the marketplace, subject to the following conditions:
1. Prospective buyers and sellers are reasonably knowledgeable about the asset; they are behaving in their own best interests and are free of undue pressure to trade. 2. A reasonable time period is given for the transaction to be completed. Given these conditions, an asset's fair market value should represent an accurate valuation or assessment of its worth. Source: investopedia.com

July 21, 2008:
This is IFA's YTD estimate of commissions and bid ask spreads paid by buyers and sellers to brokerage firms, NYSE traders and other silent partners as the result of the trading on just the NYSE and NASDAQ. That's about $645 Million per day or about 5 cents/share for buyers and sellers! Now you may appreciate why we hear constant "BREAKING NEWS" on the daily infomercials for the trading industry that lures us into trading. Please resist the urge! Don't be a bettor, be an investor. Invest right and sit tight.

August 13, 1979 Issue of BusinessWeek “Dow Jones Industrial Average: 875.25. The U.S. economy probably has to regard the death of equities as a near-permanent condition.”

June 25, 2008

What do academics say about the relationship between economic conditions and expected investment returns? - 1) Expected returns on bonds and stocks are higher when economic conditions are weak and lower when economic conditions are strong. - Fama and French, "Business Conditions and Expected Returns on Stocks and Bonds," (November 1989), Journal of Financial Economics